Pollution Prevention as Innovation? Measuring the Long Run Stock Performance

By Seema Arora
2000| Working Paper No. 1651

We examine whether pollution prevention actions result in innovation. Since a change in the product or process is not instantaneous, we compute the buy and hold returns for the long run to capture the gains due to innovation. We compare the stock market performances for firms that reported pollution prevention efforts with firms that do not report such efforts. Our results indicate that firms that engage in prevention efforts consistently outperform firms that do not engage in such efforts. Our paper is the first systematic effort to measure the private benefits due to pollution prevention activities.

private benefits